IMF has provided a draught of the MEFP, according to Dar, the Finance Minister has insisted that discussions with the global money lender finished on a “good note.”
At a news conference on Friday in Islamabad, Finance Minister Ishaq Dar stated that the text of the Memorandum for Economic and Financial Policies (MEFP) had been received at 9am.
The International Monetary Fund (IMF) and Pakistan failed to reach a staff-level agreement on Thursday, but they did agree on a broad framework that will satisfy the lender of last resort in the coming days. This led to the ministerial conference.
Just before the scheduled review talks concluded, the IMF discussed the text of the MEFP, leaving no time for the staff-level agreement that day.
The IMF Mission Chief Nathan Porter and Prime Minister Shehbaz Sharif convened an impromptu virtual meeting to resolve the impasse.
Dar argued that the encounter was “nothing remarkable,” nonetheless.
After ten days of in-depth negotiations, Dar reported that the Prime Minister had reaffirmed Pakistan’s commitment to upholding its international obligations.
Dar and his staff insisted that the IMF release the MEFP prior to the meeting with PM Shehbaz, which he emphasised was “no uncommon thing,” he continued.
Every software follows the same standard operating procedure, he said.
Now scheduled for evaluation of the MEFP and a virtual meeting with the IMF on Monday is the finance minister.
Dar stated that, “as far as this initiative is concerned,” he thought “it is in Pakistan’s interest to change some areas.”
He said that the previous PTI administration was to blame for the nation’s economic troubles, saying, “We cannot afford that this economy keeps on bleeding.”
He emphasised the need of correcting those errors immediately in order to put an end to circular debt.
Dar, who insisted that the negotiations had finished on a “good note,” expressed his hope that the IMF would not postpone things any longer than necessary and his continued optimism that the $1.2 billion instalment would be given shortly.
The minister stated that in order to comply with the IMF’s programme criteria, the government must levy taxes totalling Rs 170 billion. He also emphasised that his team will make every effort to ensure that the “ordinary people” would not bear the brunt of these taxes.
In the same sentence, he refuted claims that, in order to meet the IMF deal’s target of approximately Rs6 trillion in tax income for the upcoming fiscal year, Pakistan would need to take additional revenue measures amounting to 1.4% of its GDP, or more than Rs700 billion.
In the energy sector, he added, the government seeks to “minimise untargeted subsidies” and cut back on the circular debt flow, particularly in the gas sector, which he said must immediately be brought to zero.
The minister continued, “The petroleum development levy is virtually finished.”
Additionally, he stated that, with the IMF’s approval, the budget for the Benazir Income Support Programme (BISP) would increase from Rs360 billion to Rs400 billion.
Dar advised everyone “not to be dishearted” in response to the shockingly low level of foreign exchange reserves, which have fallen to $2.7 billion.
“The Stae Bank is managing things,” he asserted, claiming that Pakistan had made some significant payments that caused the reserves to fall so low. Despite this, he remained adamant that the “money stuck in the pipeline should come*.”
He asserted that such loans are often renewed “quite rapidly, if not immediately,” under normal conditions, following payment. Dar stated that he was still confident that the situation would be resolved quickly but he refrained from going into further detail.
In exchange for securing the MEFP and the staff level agreement, the government ultimately gave in to nearly all IMF demands.
The Fund rejected Pakistan’s “gradual approach” suggestion, stating that everything must be done up front.
There is widespread agreement to impose new taxes, raise loan rates and electricity costs dramatically, and leave the US dollar to market forces.
Every agreed-upon step would be burdensome for the majority of Pakistanis due to the severity of the economic crisis.
“Remarkable progress”
From January 31 to February 9, an IMF team led by Nathan Porter was in Islamabad for talks related to the ninth review of the government’s programme backed by the IMF Extended Fund Facility (EFF) arrangement.
Porter made the following declaration following the visit:
“To resolve disagreements over the government’s fiscal policy that had prevented the delivery of more over $1 billion from the $6.5 billion rescue package approved in 2019, the IMF mission had been in Islamabad since January 31.
“During the trip, significant progress was achieved on policy measures to address internal and external imbalances. Priorities include enhancing social protection to assist the most vulnerable and flood victims, strengthening the fiscal position with permanent revenue measures, reducing untargeted subsidies, allowing the exchange rate to be determined by the market to gradually reduce the foreign exchange shortage, and improving energy provision by preventing further accumulation of circular debt and ensuring the viability of the energy sector. For Pakistan to successfully reestablish macroeconomic stability and promote its sustainable development, these policies must be implemented quickly and forcefully, along with unwavering financial support from official partners.
“Virtual conversations will continue in the ensuing days to resolve the specifics of these policies’ implementation,”
